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Test 2

42 flashcardsby AE
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1
the purchase, sale, or exchange of goods and service across national borders.
International trade
2
The process whereby countries in a geographic region cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital.
Regional economic integration
3
What is an example of a regional trading bloc?
NAFTA/USMCA
4
A group of nations in a geographic region undergoing economic integration. (Example: United States, Canada, & Mexico).
Regional trading bloc
5
Economic Union
integration whereby countries remove barriers to trade and the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies
6
integration whereby countries remove barriers to trade and the movement of labor and capital, erect a common trade policy against nonmembers, and coordinate their economic policies
Economic Union
7
Economic integration whereby countries remove all barriers to trade among themselves, (can still block labor and capital) but erect a common trade policy against nonmembers
Custom Union
8
Requires a nation give up the least amount of sovereignty (independence). This is also the lowest level of regional integration. Results in a pattern of imports and exports that occur in the absence of trade barriers.
Free Trade area
9
represents a country's national accounting system that records all payments to entities in other countries and all receipts coming into the nation.
Balance of payments
10
Location advantage
the advantage of conducting a particular economic activity in a specific area because of the characteristics of that place. (Saudia Arabia Oil)
11
International Product Life Cycle
refers to the theory that a company will begin by exporting its products and later undertake foreign direct investment as a product moves through its life cycle. This cycle is put forth with manufactured goods.
12
Portfolio investment
refers to investments that do NOT involve obtaining a measure of control in a company
13
refers to investments that do NOT involve obtaining a measure of control in a company
Portfolio investment
14
Foreign Direct Investment
The purchase of physical assets or a significant amount of ownership (stock) of a company in another country to gain a measure of management control
15
Quota
A restriction on the amount of a good that can enter or leave a country during a certain period of time.
16
A restriction on the amount of a good that can enter or leave a country during a certain period of time.
Quota
17
Tariff
adds to the cost of an imported product by levying an additional tax upon it.
18
adds to the cost of an imported product by levying an additional tax upon it.
Tariff
19
Absolute Advantage
the ability to produce more of a good or service than another entity using the same number of resources. This theory measures a nation’s wealth by the living standards of its people.
20
the ability to produce more of a good or service than another entity using the same number of resources. This theory measures a nation’s wealth by the living standards of its people.
Absolute Advantage
21
Trade Deficit
a condition that results when the value of a country’s imports is greater than the value of its exports.
22
a condition that results when the value of a country’s imports is greater than the value of its exports.
Trade Deficit
23
Trade Surplus
a condition that results when the value of anation’s exports is greater than the value of its imports.
24
ad valorem tariff
levied as a percentage of the stated price of an imported product
25
levied as a percentage of the stated price of an imported product
ad valorem tariff
26
Export - Import Bank
finances the export activities of companies in the United States and offers insurance on foreign accounts receivable.
27
finances the export activities of companies in the United States and offers insurance on foreign accounts receivable.
Export - Import Bank
28
What are the three drawbacks of economic integration?
Trade Diversion
Shifting employment
Lost sovereignty
29
What are the two main types of trade restrictions?
Tariffs
Quotas
30
Tariff
A tax on imports
31
Quota
A government-imposed trade restriction limiting the number of goods a nation import or exports
32
Surplus
when you export more than you import
33
when you export more than you import
Surplus
34
Deficit
When you import more than you export
35
Example of an Economic Union
States within the United States
36
Which trade theory from the 1500's to the late 1700's argued that nations should accumulate financial wealth by encouraging exports and discouraging imports?
  • Factor proportions theory
  • Absolute Advantage
  • Comparative Advantage
  • Mercantilism
37
What is the primary difference between a Free Trade Area and a Customs union?
  • A Free Trade Area elimates internal tariffs, while a Customs Union keeps them for specific goods
  • Members of a customs union agree on common external trade barriers, while Free Trade Area members set their own
  • A Free Trade Area adopts a common currency, while a Customs Union keeps individual currencies.
  • A Customs Union allows for the free movement of labor and capital, whereas a Free Trade Area does not.
38
In the context of the International Product Life Cycle theory, what happens during the 'Standardized Product Stage'?
  • Research and development costs are at their peak as the product concept is designed.
  • The product is produced entirely in the home market to meet domestic demand.
  • Production shifts to low-cost bases in developing nations to serve global markets.
  • Exports to other industrialized nations begin to increase for the first time.
39
What does the 'Eclectic Theory' suggest are the three advantages required for a firm to undertake Foreign Direct Investment?
  • Efficiency, Scale, and Monopoly
  • Location, Ownership, and Internalization
  • Currency, Labor, and Infrastructure
  • Political, Social, and Economic
40
What is 'Trade Diversion' as a drawback of regional integration?
  • The loss of a nation's ability to set its own independent monetary policy.
  • The increase in total trade volume resulting from lower internal barriers.
  • Trade shifting from low-cost non-members to higher-cost members because of the trade bloc's preferences.
  • Companies moving their headquarters to the largest member nation of the bloc.
41
Which of the following is a key feature of a 'Common Market' level of integration?
  • The free movement of factors of production, such as labor and capital.
  • The establishment of a unified military and foreign policy.
  • The adoption of a single common currency across all member states.
  • The complete removal of internal tariffs while maintaining independent external tariffs.
42
Under the World Trade Organization (WTO) rules, what does the concept of 'Normal Trade Relations' (NTR) signify?
  • Nations are required to maintain a balanced trade account at all times.
  • A country must treat all WTO members equally in terms of trade barriers.
  • Developing nations must pay the same tariffs as industrialized nations.
  • Trade is restricted only to goods that do not have any environmental impact.
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